Final answer:
To calculate the taxable income for Whipporwill, Incorporated, we add back the interest expense and depreciation to net income and adjust for taxes paid. Based on the provided information, and taking into account the tax rate, the company's taxable income would be $11,759.62, but this figure doesn't match any of the presented choices, suggesting a possible need for revision of the numbers or options provided.
Step-by-step explanation:
To calculate Whipporwill, Incorporated's taxable income for the year, we need to adjust the net income by adding back non-tax expenses and accounting for the taxes paid. Given a net income of $9,173 after a 22% tax rate, interest expense of $4,674, and depreciation of $5,143, we can find the company's taxable income.
First, add back the interest expense and depreciation to the net income: $9,173 + $4,674 + $5,143 = $18,990.
Then, we find the pre-tax income by factoring in taxes. The net income is equivalent to 78% (100% - 22%) of the taxable income, so we use the equation $9,173 = 0.78 * taxable income to find the taxable income. With this calculation, we can determine that the company's taxable income is $11,759.62.
However, as this amount does not match any of the multiple-choice options, we need to double-check our arithmetic and ensure we haven't made any mistakes. It's vital to remember that for a more precise solution, we would adjust the net income upward by dividing by (1 - tax rate).
If we consider that the net income is what's left after paying taxes, then to undo the tax we should divide the net income by 0.78 ($9,173 / 0.78), to find the pre-tax income, which equals $11,759.62. Finally, add back only the non-tax deductibles: $11,759.62 (pre-tax income) + $5,143 (depreciation) since interest is tax-deductible = $16,902.62. However, this still doesn't match any of the options provided.